Why land­lords need to keep up

Boom time for Winelands rental mar­ket but new reg­u­la­tions make for steep learn­ing curve

Weekend Argus (Saturday Edition) - - PROPERTY -

THE WINELANDS rental mar­ket has grown in tan­dem with the es­ca­lat­ing sales mar­ket and, while this boom is good news for in­vestors who are en­joy­ing healthy re­turns, the new buoy­ancy is also high­light­ing sev­eral chal­lenges in the rental arena, es­pe­cially for land­lords who are not well­versed in the new reg­u­la­tions.

This is ac­cord­ing to Genevieve Smith, re­gional rentals man­ager for Lew Geffen Sotheby’s In­ter­na­tional Realty in the Winelands, who says that two key fac­tors have af­fected the lo­cal rental mar­ket, with a grow­ing num­ber of un­in­formed land­lords find­ing them­selves in le­gal and fi­nan­cial hot water.

“Al­though the Winelands still of­fers res­i­dents a tran­quil coun­try lifestyle, the towns have grown in re­cent years and they are no longer vil­lages where res­i­dents all know each other and a ca­sual ver­bal agree­ment be­tween land­lord and ten­ant is of­ten all that was re­quired.

“Ad­di­tion­ally, the rental mar­ket has be­come more com­plex and is sub­ject to more ex­act­ing reg­u­la­tions since the in­tro­duc­tion of the Rental Hous­ing Amend­ment Bill and the Na­tional Credit Amend­ment Act and its reg­u­la­tions, with con­sumers also be­ing much more aware of their rights these days.”

Smith says that own­ing rental prop­erty can still be very re­ward­ing for land­lords who have re­li­able ten­ants; pay­ing on time and tak­ing care of the prop­erty.

“In­vestors can do very well in the Winelands as the dearth of avail­able rental prop­er­ties has driven up prices with re­turns of­ten ex­ceed­ing the na­tional av­er­age and oc­ca­sion­ally even reach­ing dou­ble dig­its.”

How­ever, as the new laws play an enor­mous role in the rental arena, of­ten favour­ing ten­ants, land­lords who are un­fa­mil­iar with them can eas­ily be­come em­broiled in lengthy and costly bat­tles, es­pe­cially as evic­tion is no longer a sim­ple mat­ter of giv­ing ten­ants a month’s no­tice.

“It can be­come very dif­fi­cult, stress­ful and time- con­sum­ing to man­age a prop­erty with a prob­lem ten­ant and the days are long gone when evic­tion was the sim­ple so­lu­tion.

“The first and most cru­cial step in avert­ing pos­si­ble prob­lems is the se­lec­tion of a suit­able ten­ant, and this is where the ser­vices of an ex­pe­ri­enced prop­erty man­ager with spe­cial­ist knowl­edge is in­valu­able as they not only have a thor­ough un­der­stand­ing of all the ap­pli­ca­ble laws and reg­u­la­tions, they are also able to ef­fec­tively screen all ap­pli­cants.”

This process in­cludes sourc­ing in­for­ma­tion that land­lords usu­ally don’t have ac­cess to, in­clud­ing a de­tailed credit check.

The prop­erty man­ager will present the land­lord with a com­pre­hen­sive ten­ant as­sess­ment re­port de­tail­ing the ten­ant’s credit his­tory and fu­ture abil­ity to pay, re­sults of ref­er­ence checks and all rel­e­vant doc­u­men­ta­tion in line with Fica re­quire­ments.

Smith says that prop­erty man­agers will also ef­fec­tively man­age prop­erty in­spec­tions, lease ne­go­ti­a­tions, lease re­newals and ter­mi­na­tions, rental col­lec­tion, de­posit man­age­ment and as­sist the land­lords’ at­tor­ney with the evic­tion process if nec­es­sary, which can of­ten help the prop­erty owner avoid costly law suits.

Chris Cil­liers, chief ex­ec­u­tive and prin­ci­pal for Lew Geffen Sotheby’s In­ter­na­tional Realty in the Winelands, says: “In ad­di­tion to the main gov­ern­ing reg­u­la­tions, the rental laws also con­tain many other stip­u­la­tions that can trip up land­lords even after the ten­ant has de­parted.

“Many prop­erty own­ers are un­aware that de­posits must be placed in an in­ter­est-bear­ing ac­count and, when the lease ex­pires, if no amounts are due and ow­ing to the land­lord, the de­posit must be re­funded to­gether with the ac­crued in­ter­est within seven days of the lease ex­pir­ing.

“Fur­ther­more, fail­ure by the land­lord to in­spect the prop­erty in the pres­ence of the ten­ant at the end of the lease is deemed to be an ac­knowl­edge­ment by the land­lord that the dwelling is in a good and proper state of re­pair, and the land­lord will have no fur­ther claim against the ten­ant who must then be re­funded the full de­posit plus in­ter­est.”

If any re­pairs are needed that are for the ten­ant’s ac­count, they must be im­me­di­ately car­ried out and the re­duced de­posit re­funded within 14 days of com­ple­tion, along with copies of re­ceipts for the ten­ants as proof of costs in­curred.

Cil­liers says that in the list of new reg­u­la­tions that could eas­ily be over­looked, two points po­ten­tially have con­sid­er­able bear­ing on lessees and lessors.

“Ac­cord­ing to the Con­sumer Pro­tec­tion Act, lease agree­ments may only ex­ist for 24 month, with a longer pe­riod per­mis­si­ble only if there is a demon­stra­ble fi­nan­cial ben­e­fit to the ten­ant and the onus lies on the land­lord to prove a demon­stra­ble fi­nan­cial ben­e­fit. And, if the lease is signed by two Juris­tic Per­sons, (le­gal en­ti­ties such as com­pa­nies and cor­po­ra­tions) then the agree­ment will fall out­side the scope of the Con­sumer Pro­tec­tion Act.”

Lew Geffen, chair­man of Lew Geffen Sotheby’s In­ter­na­tional Realty, says: “The Payprop Rental in­dex for the first quar­ter of the year has re­vealed that the West­ern Cape rental mar­ket re­mains strong in the face of the gen­eral mar­ket down­turn, re­turn­ing to dou­ble digit growth seen last year.

Rental prop­er­ties like this fur­nished three-bed­room fam­ily home in Boschen­meer Golf and Coun­try Es­tate are pop­u­lar in the Winelands.

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